Greatrex: an unlikely reprieve for coal?

“Coal-fired power stations may be getting an unlikely and unexpected reprieve”

As David Cameron is taken to task on the difference between the rhetoric and reality on climate change by select committee chairmen, the headlines focus on the apparent abandonment of CCS. While jettisoning the CCS competition (although the £1bn budget was actually raided by former Chief Secretary Danny Alexander under the coalition) weeks before its conclusion may well be indicative of another Treasury victory in a Whitehall policy battle, a new aspect of the reality gap comes into view.

In November, when announcing the almost complete phase out of coal fired generation by 2023, Amber Rudd secured the endorsement of former Vice-President Al Gore in the lead up to Paris climate talks. More sceptical observers – this columnist included – noted that the number of coal fired power stations likely to close rather than make investment to be compliant with European air quality directives, suggested the announcement looked more like making a virtue of an inevitability.

With the reduction of power generated from coal fired stations falling from around a third of the total in 2014 to about a quarter in 2015, and a number of stations scheduled and announced for closure, the impact of the European industrial emissions directive seemed another factor likely to make unabated coal all but absent from our primary generation mix within a decade. For the government, an ambitious sounding policy delivered with plenty of fanfare and little intervention required – precisely what an Energy Secretary going into international climate talks, and under the cosh from the renewable industry, might have ordered.

From the start of this year those EU rules come into force, and decisions about whether to opt in to the limited lifetime derogation – restricted running hours before shutting down – or agreeing to be part of the UK transitional plan (giving plant until July 2020 to fit emissions abatement equipment) garner greater interest. The current economics of coal generation, and the large capital cost in upgrading old power stations, suggest most would opt to run down over the short term, with some safeguarding remaining permitted generation hours to meet more lucrative capacity market agreements.

While the final strait to closure has been chosen by some –  including Eggborough, Ferrybridge and Longannet – most appear not to, leaving the prospect of coal fired power generation continuing long after the 2023 end date proclaimed a couple of months ago. It seems unlikely that when investment capital is so constrained that decisions to make old power stations IED compliant are taken lightly. Perhaps large generators can foresee further lucrative tightened capacity induced measures from government and grid three or four years hence, or are just – as SSE have previously stated more prosaically – keeping their options open.

DECC are due to issue their consultation on how to meet the 2023 coal phase out this spring. Far from the headlines pre-Paris, it is perhaps going to be a more difficult commitment to meet than envisaged – and requiring intervention from the government beyond relying on upgrade costs proving prohibitive. It is another of the ironies of the complex nature of UK energy policy that while government support for the putative technology that would enable coal to continue – but cleanly – is taken away, coal may be quietly getting an unlikely and unexpected reprieve.

Tom Greatrex, former shadow energy minister